Jay

Do you have to have a view on rent growth and inflation?

Under your scenario are rents stabile or growing with inflation or falling as renters leave the rental market and become owners?

Vacancy rates are so high won’t it take a long time for demand for shovel ready lots to return? more than three or five years? You’d need to pick your location carefully.

If confidence returns won’t US inflation rise? So would bank rates rise to be more like Australia or be held artificially low to keep the dollar low leading to high inflation?

My point is if by holding a rental property you get even better cashflow why would you want to sell and bank the capital gain?

In answer to your question do aussie investors ever speculate on land the answer is yes of course. But to borrow at 6 per cent and with exchange rate risk to speculate on overseas land would be a big call!

Regards

David

As I said, the Reserve Bank is pretty optimistic and left the rate steady today.

“Recent information is consistent with the expectation that the world economy will grow at a below-trend pace this year, but does not suggest that a deep downturn is occurring.”

That’s not the words of a pessimist. If they are wrong, they are ready to drop rates, probably if unemployment goes up.

Well the Reserve Bank is pretty optimistic – more than your comments. Its not just media hype. But there’s always the xfactor of what we can’t see ahead.

The current stabilization of nominal house prices as wage inflation carries on is already making housing more affordable so there’s still a chance that the Australian housing market can adjust without a US style crash that was fueled by over building and lax lending that didn’t happen in australia.

Also Aussie households stopped borrowing like we did before the GFC. I’ve sold my Australian bank shares as I think their profits will slow.

We are very dependent on china now. It’s not pc to say it but the Chinese have a higher average iq so don’t under estimate china.. Luckily we are getting them as skilled migrants.

Stu82 if you pm me I’m happy to share with you

Hi Jay

My take on your product is that it is a good superannuation investment so makes sense that superannuation is your first Aussie interest. Normal returns on our balanced super funds are 7.5% long term so 9% is good then you get forex impact (good or bad your call) and equity amount on sale (again insert your guess). (I wish I had an extra self managed fund but mine’s all locked up in a Government guaranteed fund which you can’t go past.)

We don’t have much comparable product in Australia as the banks do nearly all the lending and much easier to get a loan so its a bit harder to sell the concept here. There’s a history of solicitor (attorney) generated lending to property going bust as they would lend with high LTV to dodgy borrowers. The valuations on these properties turned out to be dodgy so you’ll probably get more questions on how yours are valued as the note to value proportion is critical.

The joint venture concept concerned me until I realized how secure your notes are. We don’t have anything comparable in Australia – no liquid market for notes. I thought you might load selling costs in the sale but the process seems quite independent so you couldn’t do that.

I’m not ready to invest right now but when I am I would be looking at how your note values compared to my assessment of the valuation as if it looked like the initial equity was real then it would give the deal more leverage.

Q: Are the valuations based on recent comparable sales? Does Zillow struggle to keep up with comparable sales?

Thanks

David

Hi Jay

Same thing was happening on our Gold Coast. We called them “marketeers” and special legislation was introduced. Those that held on eventually made back their money but those that sold early lost thousands. Might be the same for you if the underlying property is sound.

Regards

David

Dear Investing Novice

http://www.housingpredictor.com/2012/texas.html

The Housing predictor website is saying the Houston market is recovering while Atlanta is still working through foreclosures. So you might pick up a bargain in Atlanta or buy into a rising market in Houston.

I agree having good contacts, property managers and finance can make the difference in where you’d buy. (Personally I’m still doing due diligence on contacts.)

Regards

David

Dear Alex and Jay, I think you’re on the right track in looking for good loans for overseas investors in US. It influenced my decision in the end as with 50% LTV I got 2 for one and once the loan is paid I’ll have double the cashflow.

With a good loan an investor would be more interested in higher quality lower yield US properties and you might sell more of them.

regards

David

Derek

That’s very sobering. Chilling really. Americans have shown resourcefulness in crisis before so hopefully they’ll turn it around before becoming “a banana republic”. Some tough decisions are required.

David

Rob

Advantages of German real estate

– EU lending available at low rate high LTR reduces currency risk
– high net yields in regional cities. Tenant pays many operating costs
– can buy an apartment building for the same cost as a one bedroom unit in Australia. Prices are low but have shown growth in recent years.
– low turnover in tenants
– Germany is the strongest European economy
– steady growth from a low base
– professional property managers available
– can buy with low deposit

Disadvantages

– falling population reduces demand so choose location carefully follow employment growth
– laws favour tenant in a dispute relative to Australia or US. Some caps on rent growth. (Can also be a growth opportunity if rents have not been managed for maximum.)
– potential for language issues if a technical dispute arises
– income taxes similar to other countries but need advice
– currency unknowns (could say the same for $A or $US)

Just my opinion on what I’ve read!

Cheers

David